LTA or Leave Travel Allowance- Tax Exemption Under Section 10(5)

With several long weekends slated ahead during the year, have you been planning a vacation? Since we have entered a fresh block this year to claim the leave travel allowances, special focus should be given to your travel plan to make the most of both worlds – your vacation and your taxes.

LTA is an amount paid by the employer to employee for going anywhere in India along with his family. So, the long awaited foreign vacation may be out of question as the tax exemption on LTA can be claimed for domestic travel alone.

So, if you have spent a bounty on a five star hotel stay you cannot claim that as exemption is available only with respect to travel fare, which includes air, rail or bus fares. No other expenses including for scooter, taxi, lodging or boarding charges or even porter charges can be claimed for exemption.

Round trip expenses

If you plan to take the longest possible route to reach your destination, even against the willingness of your family, then you are mistaken. The rules state that the expenses claimed should be for the shortest possible route to reach there. For e.g., if you are travelling from Chennai to Ooty. Then the claim amount would reflect, whether you have deliberately opted to extend your travel to Ranchi even though you wanted to travel from Chennai to Ooty.

Claim period

Though you are paid the LTA amount in salary during each financial year they are claimed for journeys in a calendar year. Only two journeys in a block of four calendar years can be claimed for exemption. These block are specified under the Income Tax Act (see table).

You can claim for two journeys in the same year itself, provided you make no more LTA exemption claims for the rest of the block as the Act purely mentions twice in a block of four years.

Carried forward

If you have not been able to travel or travelled only once during a single block, then you can carry forward the LTA exemption. However, it is exempt only if it is claimed in the first year of the subsequent block.

As a result you can claim for even three journeys in a year – one carried forward journey, two of the new block. Take for instance the present block of 2014-2017. In the first year 2014, you can claim a journey of the previous block 2010-13. Plus you can make two more claims for the present block (2014-2017).

Paid leave

It is a deemed provision that the person claiming the bills should be on leave for the travel period. The rule is simple – Unless you are on leave you cannot travel. If you have no leaves to take, you can go on normal leave. You have to be on leave, be it paid leave or not.

Expenses for extended family

You can claim only travel expenses for your own family for exemption. Family includes two children (post 1998), brother, sisters and parents if dependent.

You and your spouse can claim LTA for the same journey provided the expenditure is divided. An important condition here is that LTA should be a part of your and your spouse’s salary. But one should consider who of the two will benefit taxation wise.

Tax rate

If you have received LTA as part of your salary and haven’t submitted bills for exemption then the amount would simply be added to your income and taxed as per the tax slab you fall under.

Typically a person would not utilize the entire LTA limit as only fares for domestic travel can be claimed. So, when you next negotiate for your salary, ask for a reduction in the amount placed under the LTA basket. Take off for your India sojourn and make the most of your family hours and taxes.

Tables:

Blocks to claim LTA exemption

2010-2013 ( i.e January 1, 2010 to 31-12-2013)

2014-2017

2018-2021

Actual expenses of LTA exempt upto

Travel mode

Limits*

Air

Amount of Economy class Air Fare – shortest route

Rail

Amount of AC First Class Rail Fare by the shortest

Road

If not connected by rail then AC First Class rail fare by the shortest route

*Subject to actual expenses

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.